Feeding East Asia

The importance
of the East Asia region as the most significant market for
many New Zealand and Australian food and fibre products is
set to grow in coming years, highlighted more recently by
the global economic downturn, according to Rabobank.

In a
recent report titled, ‘Feeding East
Asia’, Rabobank senior analyst Marc Soccio says
the global and economic downturn has sharpened the focus
onto the East Asian region as it continues to expand its
slice of the global economic pie, offering opportunities no
longer available in traditional markets as incomes grow and
diets change in fundamental ways.

“The significance of
East Asia to New Zealand and Australian farmers and
agribusinesses is growing from an already strong base, with
markets in developing economies coming on-stream to
supplement more established markets in the region,” Mr
Soccio says.

“As developing countries across East Asia
continue to grow their share of the global economy, rising
incomes are gradually transforming household consumption
patterns. Opportunities for greater trade with the region
are widespread and are more or less subject to the ongoing
evolution of strong and sustainable consumer economies.”

Mr Soccio says supply chains are evolving, and
competition to capture value from rising trade flows is
arising from both within the region and beyond.

“But
overall, with a greater understanding of this diverse
region, New Zealand and Australian suppliers appear well
positioned to satisfy growing demands for a greater range
and value of food and fibre production in years to come.”

The cultural and socio-economic diversity inherent in
East Asia remains a defining characteristic that makes the
region a particularly complicated prospect to navigate.

Accordingly, Mr Soccio says the need to better understand
the region and its future direction has never been so great,
as this will provide New Zealand and Australian food
producers with the competitive advantage required to explore
the right markets, in the right way, at the right time.

On the topic of the rising tide of foreign ownership in
the sector, the Rabobank report refers to the case of
Australia’s sugar sector which undertook a significant
shift in ownership of the industry’s downstream milling
assets in the period from 2010 to 2011.

“In fact, over
the past decade, control of almost three-quarters of
Australia’s downstream sugar refining assets have been
acquired by foreign investors – around two-thirds are now
owned by businesses based in East Asia,” Mr Soccio says.
“The investment into the sector has had a revitalising
effect, but it has also significantly changed supply chain
dynamics, with cane farmers now needing to be more mindful
of how they transact with parties further downstream.”

The value created by opportunities to supply food and
fibre products to East Asia into the future will be
influenced by a number of factors.

“Competition from
suppliers, both within the region and in other parts of the
world, will continue to put the strong reputation of New
Zealand and Australian food producers to the test,” Mr
Soccio says.

“Many countries across East Asia are
significant agricultural producers in their own right and
will try to meet their own needs as best as they can, which
can limit opportunities for some crops where New Zealand and
Australian producers may not have a clear cost or quality
advantage.”

Mr Soccio highlights other competitive
forces, such as the way in which value is shared in the
supply chain, as well as exchange rates and bilateral trade
negotiations, will also have a bearing.

“One way or
another, the stronger ties being forged to the region
through greater inbound and outbound trade and investment
will underline New Zealand and Australia’s pivotal role in
feeding Asia in the years to come,” he says.

Rabobank New Zealand is a part of the
international Rabobank Group, the world’s leading
specialist in food and agribusiness banking. Rabobank has
more than 110 years’ experience providing customised
banking and finance solutions to businesses involved in all
aspects of food and agribusiness. Rabobank is structured as
a cooperative and operates in 48 countries, servicing the
needs of approximately 10 million clients worldwide through
a network of more than 1600 offices and branches. Rabobank
New Zealand is one of the country's leading rural lenders
and a significant provider of business and corporate banking
and financial services to the New Zealand food and
agribusiness sector. The bank has 31 branches throughout New
Zealand.

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